The Future of New Zealand Wine

 


The future of New Zealand wine is strong – both through local sales and, increasingly, export. International trade in wine remains highly competitive, market and margin-driven, and is always subject to the kindness or wrath of currencies trading - as well as Mother Nature’s influence on the raw product. The climate change effects now noticeable in the northern hemisphere seem to be less evident so far in New Zealand with the weather mostly even and dramatic variation only every four or five years (2017 is not looking as good in areas as 2013 through 2016). The market for the benchmark wines of the world appears to be as strong as ever, irrespective of climate; red and white Burgundies, Spanish Rioja, American Cabernet, Austrian Gruner Veltliner, Argentinian Malbec are a few from a list that is at least one hundred strong, and New Zealand Sauvignon Blanc and Pinot Noir can be included in this collection.
There’s no question that New Zealand produces fine wines. An increasing number of examples from varieties other than Sauvignon Blanc and Pinot Noir are getting noticed by Sommeliers and wine buyers. Some of these include: Chardonnay, Pinot Gris, Syrah, Methode Traditionnelle and Rosé.

Export statistics (taken from NZ Winegrowers) reflect an increase in demand for New Zealand wine in the USA (NZ$175 million 2007 to NZ$460 million 2016), United Kingdom (NZ$227 million to NZ$381 million in 2016) and Canada (NZ$33 million to NZ$107 million in 2016); the Netherlands and China are the next two on the list. Variety wise - Sauvignon Blanc leads the pack by a significant amount exported (68 million litres in 2008 to 182 million litres 2016); Pinot Noir (12 million litres in 2016), Chardonnay (6 million litres in 2016), Pinot Gris (almost 5 million litres in 2016), Merlot (1.9 million litres in 2016) and Sparkling wine (1.4 million litres in 2016). The export list has twenty-three varieties or styles reported in total. The average price for a NZ wine in the USA, UK and Canada is higher than for our closest and most competitive trading partner Australia.

The numbers themselves look solid, but are somewhat skewed by bulk wine exports, some very low FOB (Freight on Board) pricing and an expectation by many northern hemisphere consumers that New Zealand wine is or should be cheap. This is unfortunately an issue for the boutique or small volume producers wanting to compete on the international stage. Many of these wines are outstanding examples and sadly overlooked in favour of international counterparts, or they are deemed too expensive for a ‘New Zealand’ wine. Some of the best wines available for export are held back by the bulk wine trade and ‘cheap wine’ perceptions.

Even though New Zealand wine commands a higher price on average than its major competitor, this is somewhat skewed by the constant low price of many Australian wines, and imports from other countries that keep prices low and margins trim. The low-price drive of the 1990s remains a challenge for Wines Australia to overcome despite significant investment taking place to rebrand the wine globally (and a similar focus on higher quality examples).

At home New Zealand wine sells extremely well, and in many cases producers are running out of stock sooner than expected – the roll over to 2016 Pinot Noir already is one example - many of these wines should be in the producer’s warehouse for at least another year. Some companies are forced to release the next vintage early, or ask their loyal customers to hold off for the next formal release.  

This does present certain challenges - including forecasting market demands, and the role the value of the New Zealand dollar plays in export sales (the lower the better). Planning twelve to thirty-six months ahead along with maintaining a capital budget that allows for market exploration as well as maintenance of current sales levels is a constant headache for many.

One of the competitive advantages developed to meet these challenges has been to diversify and target multiple markets simultaneously – especially so for exports. This is best achieved by maintaining a portfolio of wines at multiple price points targeting different sectors of the market. These sectors include supermarket, fine retail, on-premise restaurant or hotel, and strategic international locations with specific hubs for distribution to consumers-direct, restaurants-direct where possible – and links with supermarket chains or specialty stores (think Amazon.com model). These efforts are designed to attract the attention of consumers and trade buyers across multiple price point thresholds.

One excellent example of how this model can be successful is the Villa Maria brand, headed by industry icon Sir George Fistonich. Quality and consistency, over-delivering for the price, and being instantly recognisable visually are attributes of a successful model. Many of the Villa Maria wines are immediately noticeable, with white, copper-gold or black labels and a simple logo, and Private Bin, Cellar Selection and Reserve wines in the range under the same branding. Sir George ensures the winemakers for each of these have autonomy stylistically.

I have dined at international airport restaurants many times and often seen a Villa Maria Cellar Selection Sauvignon Blanc available by the glass at a very attractive price. In New York Villa Maria Reserve Pinot Noir is listed at Michelin Starred destination restaurants such as The Musket Room.

Villa Maria is a company that manages its market presence constantly and well, does not rest on its laurels and demonstrates that vision, persistence, patience, quality raw product and attention to detail can lift the value and enhance New Zealand wine’s reputation. The future of New Zealand wine is strong, and while the road to market will always be challenging the rewards of sales and loyalty are available.

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Comments

  • Snooth User: Lalande85
    2144084 7

    Agreed! Have been fans of Kiwi 'fruits' for a long time and always attend the annual showing here in Vancouver. Cheers! Henrik

    Aug 04, 2017 at 11:27 AM


  • Snooth User: BRIGANTE
    1271681 108

    FOB=FREE ON BOARD

    Aug 04, 2017 at 3:34 PM


  • Agreed the small New Zealand wineries are Rockin it. They need to stop talking about how good their wines are and start talking about how little they make. Should put the # of cases produced on back label.

    Natural for humans to want what they can't have.

    Aug 04, 2017 at 5:34 PM


  • Good suggestion re' the number of cases produced on labels from small NZ producers.

    Aug 07, 2017 at 1:28 AM


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